Gov mulling introducing hedge fund

Monday June 29, 2009

LAHORE: Based on Kibor mark-up rate, the government is considering a proposal to introduce Hedge Fund in the Trade Policy 2009-10 to facilitate exporters through export refinance facility. Under the scheme, if the mark-up rate, which is yet to be determined, goes up, the exporters would get the difference, but they would also be bound to pay back if mark-up goes down.

Federal Commerce Secretary Suleman Ghani said this in a meeting with members of Pakistan Tanners Association (PTA) here on Saturday, held in connection with seeking inputs for the upcoming trade policy. PTA central Chairman, Agha Saiduddin, gave a detailed presentation on leather industry's issue, while PTA (North Zone) Chairman Khurshild Alam also spoke.

The tanners emphasised on rupee-based 'Fund' rather than dollar, on which the Commerce Secretary asked them to submit their practicable suggestions so that the 'Fund' could be made beneficial to them. Responding to PTA demand for providing 25 percent financial cost of setting up design centres and laboratories in individual tanneries, Ghani said that the government has allocated substantial amount of Rs 40 billion for Export Investment Support Fund in the 2009-10 budget, out of which it could provide the required financial assistance.

He said the leather sector would be given due share from the Export Investment Support Fund, and asked the tanners to submit feasibility reports and practicable proposals for upgradation of the plants. The Secretary also agreed, in principle, to PTA demands for providing subsidy for setting up effluent treatment plants in individual tanneries contributing to 70 percent of total leather exports of the country.

About the demand for providing landfill sites near tanning industry for waste disposal and making mandatory the flaying machines in all slaughtering houses of the country to save hides and skins from butcher cuts, he said that both matters come under the jurisdiction of local governments. He asked the PTA to take up the matter with the local governments for which the federal government would be ready to provide financial assistance.

Responding to the PTA demand for including finished leather in the Free Trade Agreement (FTA) list of China, Ghani said the Ministry of Commerce agreed with the proposal and would take up the matter with the Chinese government. As far as the import of chemicals, particularly used in the tanning industry, is concerned, he said the potential tanners are in a position to import these chemicals on their own but the SMEs would have to rely on commercial importers.

The industrial importers could sell chemicals in the open market, that is tantamount to exploit the small tanners. He advised the small and medium size tanners to form a group so that they could also be allowed to import duty-free chemicals, and asked the Association to quantify the chemicals' demand. He also agreed with the proposal for allowing duty-free import of second-hand machinery for the tanning industry and asked to prepare a working paper on the import of new machinery and parts as well with a list of machinery.

About giving the National Institute of Leather Technology (NILT) Karachi under the control of Trade and Development Authority of Pakistan (TDAP), he disagreed with the proposal. He, however, supported the University of Veterinary and Animal Sciences (UVAS) Lahore's desire of taking over the NILT, and advised the PTA to create a firm with a view to make partnership with UVAS for getting the administrative control of NILT.

The Commerce Secretary termed the proposal of relaxing the National Environmental Quality Standards NEQs by 30-40 percent for three years as impracticable, saying that once the NEQs are established and propagated can not be changed, and some agencies could take notice of the change.

On providing exemption to tanning industry from load shedding being continued process, he said the demand is impracticable till the power shortage issue is resolved. He, however, advised the tanners to get into contractual agreement with the electricity distribution companies for reliable power supply and there must be a provision of penalty and compensation in the agreement in case of violation of the electricity supply schedule.

Responding to the demand for cheaper refinance facility at five percent mark-up, the Federal Commerce Secretary said the mark-up rate has already been declining and could further reduce. As a result, the refinance rate would automatically come down to five percent with the decline in the interest rate within next four-five months.


(BRecorder)